What is vendor consolidation and how do you approach it?

Vendor consolidation is the strategy where organisations deliberately reduce the number of software suppliers. Instead of using a separate tool for every function, a limited number of preferred suppliers that cover multiple needs are chosen.

Why vendor consolidation?

The average medium-sized organisation pays for more than 150 different SaaS tools. Each with its own contract, billing cycle, administrator and renewal date. Costs are fragmented, there is a lack of oversight, and negotiation positions are weak.

Vendor consolidation addresses four problems simultaneously:

• Costs: Fewer suppliers means larger volumes per supplier and therefore more room to negotiate lower prices and better terms
• Management: Fewer contracts, fewer invoices, fewer renewal dates to keep track of
• Security: Fewer integrations between tools means a smaller attack surface
• Compliance: A more limited supplier list is easier to audit and document for NIS2 and GDPR

How do you do vendor consolidation?

Step 1: Categorise your software landscape. Group all tools by function: communication, project management, security, storage, HR, and so on. Which categories have the most overlap?

Step 2: Analyse usage and satisfaction. Which tools are actually used? Which are popular with end users? Consolidating to a tool that no one likes backfires — this leads to shadow IT.

Step 3: Select preferred suppliers. Choose one or two preferred suppliers per category. Actively negotiate bundle prices if you purchase multiple products from the same supplier.

Step 4: Phase the rollout. Don’t consolidate everything at once. Start with the categories with the most overlap and least resistance. Build momentum for the tougher transitions.

Vendor consolidation and lock-in

The biggest risk of consolidation is vendor lock-in: being too dependent on one supplier makes you vulnerable to price increases, company acquisitions, or service degradation. Always have an exit strategy: contractually specify how data export works, what the transition period looks like, and the costs of early termination.